July
21, 2009
Earthbound
Farm to acquire organic food firms; Changes Name
Drew and Myra Goodman still retain 'significant' but undisclosed
equity
in the company they founded 25 years ago
by
Sustainable Food News *
Photography by Mike Walsh
Earthbound
Farm, the nation's largest grower of organic produce, said Tuesday
it has a fourth investor, HM Capital Partners LLC, which will
help it acquire other organic food companies.
The
company told Sustainable Food News that as a result of adding
the new partner it also formerly changed its name from Natural
Selection Foods, LLC to its brand name, Earthbound Farm.
San
Juan Bautista, Calif.-based Earthbound also declined to say whether
the company remains a limited liability corporation or how much
of the company is now owned by HM Capital, which reportedly takes
majority positions in companies it historically invests in.
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The
company did not disclose the financial terms of the deal, but
an online private equity trade publication, peHUB - run by ThomsonReuters
- first reported on Tuesday that Earthbound received $135 million
in debt financing, citing reports published by two debt providers.
Earthbound
told SFN that the amount was incorrect and was asking peHUB for
a retraction. peHUB told this reporter they had not been contacted
about a retraction.
SFN obtained a report by one of the debt providers, Piper Jaffrey,
which listed Earthbound as securing leveraged buyout (LBO) financing
of $135 million from Dallas-based HM Capital through RBC Capital
Markets, resulting in limited leverage of about 1.9x to 2.9x.
LBO
transactions are mostly financed through debt and do not typically
require a significant equity investment, which is why they are
so attractive to private equity firms.
However,
the Piper Jaffrey report said the equity contribution was around
50 percent of the capital structure.
In
a subsequent interview posted on peHUB discussing the $135 million
deal, HM Capital partner Andrew Rosen said his group had been
in talks with Earthbound for over two years.
HM
Capital has executed over 30 transactions in the food sector exceeding
$6 billion in transaction value.
Rosen
also told peHUB that the "core salad business isn't exactly
ripe for consolidation since we are the largest today. But we
can look at other product categories that are organic - it could
be within produce or elsewhere."
He
also said Earthbound's extensive marketing, distribution and sales
network could benefit other organic food companies.
"Most
of the companies (in the organic food industry) are relatively
small and have difficulty gaining access to consumers," he
told peHUB. "We will look at those opportunities and also
ways to expand Earthbound's capabilities."
The
three original partners of Earthbound - organic produce growers
Mission Ranches and Tanimura & Antle, as well as Earthbound
founders Drew and Myra Goodman - each owned 33.3 percent of the
company prior to the deal.
The
Goodman's teamed up with Mission Ranches in 1995 and Tanimura
& Antle four years later.
The
company said all three still retain "significant" shares
in the company but declined to be specific.
Charles
Sweat, current president of Earthbound overseeing the company's
operations, has also assumed the role of CEO.
"We
see tremendous opportunities for Earthbound Farm to leverage its
brand, organic acre base and farming expertise to introduce additional
organic products," said Rosen in a press release from Earthbound.
Earthbound
products are sold in 75 percent of all U.S. supermarkets, the
company said.
Earthbound
is celebrating its 25th anniversary this year and relies on a
network of over 150 farmers utilizing 33,000 acres. The company
also said the use of organic practices by the farmers will prevent
the release of 10 million pounds of conventional agricultural
chemicals into the environment in 2009.
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This article is reprinted via permission of Sustainable Food News
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